Signs a stock is targeted for short & distort manipulation

[asdfu099]

Thanks for the detailed post. First for the record, I did not intend this board to be about sub .05 stocks. I agree under .05 is BVRY dangerous to be shorting.

AWSL was not SEC reporting. They issued the dividend to squeeze the shorts as they were under heavy attack. How do I know it was naked shorting? 8 months of RegSho compliance alerts. 1 day alone there was over 1 million shares shorted. They were short more than the float. We did find out that shareholders once they demanded that there stock not be lent out and some even took certificate delivery, it took more than 4 months to get the cert.

I remember Tim Sykes putting out news about how the restricted stock dividend was cause for the stock run up again. The well known short manipulators at thestreetsweeper also complained about it. They then attacked the company with articles of innuendoes but no real facts, but masses get manipulated easily by media, images and that sort of writing.

I know of a company that is about to do some massive awareness. If the short games start as I am sure they will, I will see if I can get them to try to Cusip trick. I will keep you posted.

[sanbrunobaby]

Hah,no I am not a marlet maker nor do I represent one. Just because I question urban legends doesnt mean anything more than as a speculator I try to learn as much as I can.

Here is why changing the CUSIP number works ( restircted stock being issued doesnt effect this). Back in the 60's during the gog-go years physical certificates were still widely used to settle trades. as volume grew this system became very unwieldy and subject to many abuses. So the CEDE/DTC system emerged.

Say a company has 1 million free trading shares, those are in the CEDE inventory. If broker A buys 100,000 shares, and broker B sells 100,000 shares, they both have credit/debit to their accounts via CEDE. No matter what trading activity occurs, the CEDE balance is supposed to balance aganst the CEDE certificates held ,i.e. 1 million shares, which is on the books of the transfer agent of the company.However if the company for example chanegs its name ad requires a new CUSIP number, CEDE has to return "certificates" ( may be book entry which is anotehr matter) to the transfer agent in exchange for the certificates under the new CUSIP number.

The market maker often goes through a clearing agent, or the broker places traade with market maker if they are not market maker themselves, and ultimately through a clearing agent. When Reg SHO/fail to deliver reporting started one of reasons was some market makers did either through error or possibly speculation sell more shares than they brought in. Since the market makers have 3 days to settle all trades, and if I recall they can file for an extension of an additional 7 days, theoretically they could naked short sell during that period. Why wouldnt they ? (a) reduces their net working capital which reduces their ability to trade (b) they take a risk they would have to cover- and frankly most market makers simply not in the business of speculating in stocks, but insetad capturing teh spread and commissions. (c) FNRA the last few years especially since scandals involving purchases/sales on Frankfurt exchange, watches these things much closer and can fine market makers for abuses.

A bigger reason I have hard time believing maked short selling of sub $.05 stocks is CEDE/DTC f they allow an imbalance to occur, where one broker is owed 1.5 million shares for shares he bought but CEDE only has 1.0 million share son hand, CEDE has a liability.You will notice a few years ago CEDE started issuing more DTC chills on stocks- I cant prove it but my impression is one of reasons was to clear out stocks that had potential for abuses whatever the rules were.

I will take a glance at stock you mentioned, but issuing restricted stock normally is done for many reasons- a typical one is to incerase authorized shares so people can fall under the 10% or 5% thresholds ,so they either can sell shares ( as a non control person), or if SEC reporting fall under limits to report their trades.

The example you give is interesting- if a restricted stock dividend made that doesnt effect the cusip number, a cash dividend i know causes havoc if there was a short ( as the cash dividend must be paid on shares that presumably dont exist). Why stock would go up when a restricted stock dividend was declared I dont know the circumstances- coudl be (a) holder of stock about to do a promotion and wanted to sell shares but (b) wanted to keep same ownership so waited until dividend received.

Was that company a reporting company ? Out of interest what made you think the stock was naked shorted ?

[sanbrunobaby]

Hah, I havent a clue how anyone could short a sub penny stock, and no one seems to be able to say how to do it.

I am not sure which posts you looked at but I have made positive posts too. For example I like Hecla Mining, Chester Mining, and I am currently looking into New Jersy Mining and Kalahari Greentech. So I wouldnt say all my posts begative.

Two otehr companies which I do quetion I am trying to learn more about inevstor psychology since I am somewhat new to these baords. Companies that logically I thought had no true value yet had liquidity for a time- so I figure more I understand why other people buy the better.

Market makers have to be careful, FNRA a lot stricter than they used to be. I cant imagine- and I admit I could be wrong- any market maker posting on a bulletin board.

I admit also you could be right that naked short selling occurs in penny stocks, many people believe this, I have yet though seen anything definitive that in current market this is prevalent or standard practice.

[asdfu099]

Well in fact my example. AWSL did do the same thing you suggested to offset the naked short abuse. The issued a restricted stock dividend. Twice. Each time when it was announced and when it neared the record date, the stock went back up dramatically.

The Cusip trick I do not believe works. But I have not tried it to be honest.

So are you a market maker or do you just represent one?

[asdfu099]

I just looked at your posts on the other boards. In my sampling it appears you generally are pointing out flaws in every company and I would even speculate to say you appear to be a short seller pro. Perhaps a pro trader, likely even a market maker or representing one. Given this insight it make sense why you keep referring to the naked shorting as an urban myth.

Perhaps I am wrong but I would bet on it.

[sanbrunobaby]

the other factor is DTC/CEDE. they are supposed to balance to the transfer agent- if they dont, which did happen 10+ years ago sometime, this casues all sort sof issues tehse days previously it did happen but DTC figured out the liability they were running and cleaned up tehre act a lot mroe than a decade ago.

a company can always look at both their OBO and NOBO records and figue out where the imbalance is- and force a resolution by several means. and DTC with their arcane process of putting chills and global locks has their own ability to resolve these situations.

i am not saying there arent shady operatros who try to scam the system

but if someone were naked shorting a stock it causes an immediate imbalance on DTC records which company if they are attentive can figure out quickly with NOBO AND OBO records. These are available by broker-and by looking at over the relevant time period compared to transfer agent totals for the balance at CEDE/DTC- and can then be used to track down where the short came from.

finally a company and force a resoluton also by changing the CUSIP numberand calling in the DTC/CDE certificate,or in some instances declaring a dividend can achieve same result. So companies whining that some mysterious and nefarious naked shorting is hurting their stock do have tools to combat this.so why dont they ? because their stock is not being naked shorted, but it amakes a good story

that buyin site uses a formula that they believe shows naked shorting but it is not based on amount of shares actuallybeing shorted but some formula they have devised. ( this is what was explained to me, perhaps they do have a precise way of measuring that i am not aware of).

--just think of it, if you were running a company with massive shorting going on, would you pile ,in-change name of company thus CUSIP number to force the shorts to cover ?

[sanbrunobaby]

an interesting discussion, yet fundamentally where is the proof this occurs ? talking to market makers they all tell me simply they are not in the business of taking risks like this though they may do so knowing a client may bail them out, or that as favor parking a trade in some fashion.

take a stock with a .03 bid and .05 ask. volume buyer comes in at 05, they figure they can sell to that buyer, and somehow cover themselves at .03- maybe they have a customer they know would sell at that price, who might do for a favor or whatever

i guess to be convinced i simply would be interested in a factual example of this.maybe there is, i just havent seen it.i have sen fail to delivers for many other reasons than someone shortng the stock- sometimes sheer inefficiency of smaller brokers for example.

and idea average market maker would run around bad mouthing a stock to drive price down ?

just out of curiosity haev you ever had this discussion with an actual market maker ?

with all respect though i appreciate your comments as this urban legend i have been hearing about for years.

[asdfu099]

I don't really trade in sub .05 stock. However the market maker shorting usually is for a short 3 days or less trade. However, what I have witnessed is some times when a big promotion starts they figure they can short and buy it back within a few days. Fairly innocent. But if the sell off that usually comes, does not come, well than they get desperate. Especially if the market is movie up.

In these situations they drag it out, they get a friendly market maker to sell them stock (short) to cover it and than start again. They keep rolling it around a number of friendly firms. I assure you this happens. There is even a term for this. "Parking a trade".

I watched on AWSL Reg SHO failed to deliver flags for 8 months during a long promo. The market maker would do as I described above, while than trying to discredit the company in every way possible.

I seen this very closely!

If you need more examples there out there.

[sanbrunobaby]

I guess my issue is no one can show that naked shorting actually occurs in pink sheet stocks. that buyin site my understanding uses his formula for estimating the short positin which several broekrs i know state is not accurate as it not based on factual data. having said that i have in the past looked at that site just to gather information.

i guess perhaps a definition is in order. yes market makers can sell stock and not cover for three days,and my understanding of rules is they can ask for extension to 7 days and worst case 15 days- but market makers do not wish to past 3 days becasue it invites FNRA scrutiny and reduces their trading ability as short position reduced their net working capital position.i think problem retail investors have in understanding the system is they think market makers think like them- simply market makers make money off the spread and volume and are very very short term orientated. so if they sell a stock in the morning, knowing that they have a place they buy cheaper in afternoon, or they want to take short term bet the sale will drive down the price on the bid, i have no doubt that occurs at times.

the idea the average market maker is out taking risks to short stocks under $.05, invite FNRA scrutiny, to most market makers is not credible.

if i am wrong all it would take is concrete evidence that this regularly occurs.

then if it does occur in stocks under $.05, then discussion about whether it helps or not promote orderly makets.

same discussion applies to convertible dept operations, so caled toxic financing. every one i know in that business also laughs at the idea they are shorting sub penny stocks, why ? they get their discount regardless. if you coudl make 50% automatically with every trade, why would you take risk on shorting stocks ?however closer to cnversion date once they decide to convert they may sell a stock and cover 3 days later, when there is volume.

i am open minded but for years i hear people talking about naked shorting pink sheet stocks as rampant in the market, yet no one shows me a broker who will do this for a client.

[asdfu099]

Don't get me wrong, I wish it was easier for retail investors to short penny stocks. There are a number of them that warrant it.

It is the inside, big boys club where they seem to have all the a rules in there favor. This is the real problem,. Naked shorts allowed as long as they can say they are just trying to make a market. Watch CSTI and other well known shorting market makers. I have seen them "make markets providing liquidity" aka known as naked shorting pushing a stock way down in value, trading more shares than are even issued by the company. The stacking the offers, low offers, etc. to make it look like a massive sell off is underway, even if there isn't one. Again many pumps do have big real sell offs. But when they don't the market makers do it anyway. That is my problem with it.

You might want to get on the Buyins.net mailing list or watch the web site. They have often exposed naked shorting and had it lead to a short squeeze. Mind you it is mostly for larger stocks. But I have seen it on some penny stocks also.

[sanbrunobaby]

I agree with you about Federal Reserve to be sure, and when a crash comes it will be massive.

On shorting penny stocks the persistence of this urban legend is astonishing - no one I know in the industry takes this seriously, but they all say it makes for good conversation with retail investors. For stocks above a few dollars I dont know, but certainly hard to see why generating liquidity is a negative in a free market. Sure there are some bad apples out there, a bigger issue is the costs and constraints imposed through regulaton that is driving legitamate small companies out of business. Just my opinion of course !

[asdfu099]

The biggest problem with the current government is that is being run by the private bank called the Federal Reserve. The Federal Reserve is as Feral as Federal Express. Now guess who runs DTCC? That is right, the same group that is above the law, the ones who can print as much money as they want to whom they want can do the same with DTC. That is why select people can seem to borrow more stock than is in circulation.

I think you are not looking at the big picture. This is not about brokers shorting. Perhaps they might a little. But the real shorts are MUCH much bigger. With friends in high places. That is why when a short trade foes bad enough they can get DTC locks or a company suspended from trading or get the big media to run smear campaigns.

[sanbrunobaby]

I am unsure why a logical analysis of why market makers are not shorting penny stocks under $.05 has anything to do with whether government is honest. Look up FNRA rules and net working capital requirements for market makers, why on earth would market maker want to attract scrutiny in this day and age.

As far as US government there are a lot more dishonest and corrupt governments out there, I worry more about the inefficiency of this behemoth government we have now.

[sanbrunobaby]

I am not referring to stocks in $4 price range, but to stocks under $.05 and $.01 in partcular.

The interesting thing about this urban legend of shorting penny and sub penny stocks is no one I know in industry take seriously yet retail investors seem to like the story . Tht is not only market maker I know.

Good test is what retail broker in US will short penny stock ? Everyone talks about shorting but then cant idenify broker who would short these stocks. The level of regulation of brokers and market makers in particular has grown signficantly the past few years, shorting stocks in particular past 3 days is more trouble than it is worth.

I think perhaps it is a conceptual issue- market makers make money of the spread and volume, so their approach much different than investors.

[asdfu099]

Well we can see that post you quoted speaks for itself. AWSL has not done any diluting. In fact there is less shares outstanding than there was in 2009/ 2010.

We also see that AWSL news was correct and not misleading like you "quoted".

I find it interesting to see your choice in picking an example. Are you an AWSL shareholder?

[asdfu099]

I am not referring to only stocks under .05. One dat alone AWSL was shorted 680,000 shares over $4.00. So who was the short? WIth about 15% of trading days, volume was 100% short sales. Most days it trades it is between 25 to 70% short. Again if you can't short who is doing this. These short statistics are right from RegSHO / FINRA.

While your friend the market maker might be honest. You really think he speaks for all market makers? Let me guess you also think government is honest and no corruption exists.

[sanbrunobaby]

Thanks for posting the article. I asked my market maker friend about naked short selling of pink sheet stocks and his retail clients. He said for a while he tried to explain to retail clienst but finally gave up as in his opinion simply retail speculators in penny stocks love conpsiracy theories so much it wasnt worth him annoying clients with the facts.

He said he is not in business of speculating in stocks, just making the spread. While he may sell in the morning and cover by the close of market, he said ofc course there are some market makers who may stretch out a few days- but the increased restrictiosn from clearing firms and DTC on penny stocks,has an effect even on market makers.

where does a retail investor go to naked short sell a penny stock tradng udner $.05 ? do you have any articles actually stating an actual case where somone's broker borrowed a stock trading under $.05 ? could be, i just havent seen.

[sanbrunobaby]

I am referring to OTC stocks tading udner $.05 . The link you provided doesnt relate to market I was referring to.

[sanbrunobaby]

It is utterly amazing to me that any market maker I know or know of, any professional within the industry, just laughs when they here people talking about naked short selling stocks trading under $.05. Yet penny speculators seem to actually believe someone is short selling their stocks.

Market makers have a short window, a very short window, in which they can short stocks but they have to cover within that window.

There are as there always have been scam operators out there, but the idea that there is consistent naked short selling of penny and sub penny stocks seems unproven and not even probable as much as many seem to believe.

[CryptoWStreet]

OTC MOVERS

Looks like EWS* will be going down in flames. There are some big Red Flags. They released PR's that don't add up, and are mostly unverifiable. Short EWS* if you can find shares to borrow. Very likely to go back to .02. It started from a failed Beverage Shell, and appears to be following the same path of printing and diluting shares.. Personally, I made approx. $72,000 on the one and only run. NOW that was a OTC Movers, and Savvy Traders dominated and profited. All that is left now is Dreamers deep in the red.. TIMING was everything..

The manipulator who use to go by the name of WC, now called something else. Has even an OTC MOVERS BOARD of his/her own. The statements made here are just incredible. They use tactics of fear and instruct other IHUB members to short and manipulate a stocks for personal gain on our HARD EARN MONEY. The board itself, its based on the FUNTIMETALS OF MANIPULATUION. I'm all for calling out a bad stock, when verified DD and documents could be proven and liable to its credibility. Not pumping up from time to time, bashing on inconsistencies with no creditable facts. Then building a BOARD based on how to manipulate OTC SMALL CAP companies for your personal gain, then the balls to brag about it. Perfect example is the post provided. This board here should be used to expose such claim. Not just victims like me, but others should come forward and bring up the issues, I would like this board to grow, I believe it stands for something, and I will support it. Thank you and Happy Safe Trading.

[asdfu099]

In this $2,000,000 fine by the SEC on this trader for naked short selling must be an "urban legend" also.

http://www.sec.gov/news/press/2011/2011-264.htm

[asdfu099]

As we can see this manipulation continues. Until the market makers are no longer exempt to the anti naked short selling rules, these games will continue.

[asdfu099]

Naked short selling, or naked shorting, is the practice of short-selling a tradable asset of any kind without first borrowing the security or ensuring that the security can be borrowed, as is conventionally done in a short sale. When the seller does not obtain the shares within the required time frame, the result is known as a "failure to deliver". The transaction generally remains open until the shares are acquired by the seller, or the seller's broker settles the trade.

Short selling is used to anticipate a price fall, but exposes the seller to the risk of a price rise.
In 2008, the SEC banned what it called "abusive naked short selling"[2] in the United States, as well as some other jurisdictions, as a method of driving down share prices. Failing to deliver shares is legal under certain circumstances, and naked short selling is not per se illegal.[3][4][5] In the United States, naked short selling is covered by various SEC regulations which prohibit the practice.

Critics, including Overstock.com's Patrick M. Byrne, have advocated for stricter regulations against naked short selling. In 2005, "Regulation SHO" was enacted; requiring that broker-dealers have grounds to believe that shares will be available for a given stock transaction, and requiring that delivery take place within a limited time period.

As part of its response to the crisis in the North American markets in 2008, the SEC issued a temporary order restricting short-selling in the shares of 19 financial firms deemed systemically important, by reinforcing the penalties for failing to deliver the shares in time.[8] Effective September 18, 2008, amid claims that aggressive short selling had played a role in the failure of financial giant Lehman Brothers, the SEC extended and expanded the rules to remove exceptions and to cover all companies, including market makers.

Some commentators have contended that despite regulations, naked shorting is widespread and that the SEC regulations are poorly enforced. Its critics have contended that the practice is susceptible to abuse, can be damaging to targeted companies struggling to raise capital, and has led to numerous bankruptcies.[6][10] However, other commentators have said that the naked shorting issue is a "devil theory",[11] not a bona fide market issue and a waste of regulatory resources.

[sanbrunobaby]

Perhaps another way to look at is that market makers are simply in the business of making money on the spread and commissions on trade flow- they are not in business of speculating in stocks though of course sometimes they do. But every position they take for their own account reduces their net working capital that sets the trading volume they can handle per day. Thus generally the thrust of market making is not acquiring a position to earn proceeds from trades going beyond that day or three days.

[sanbrunobaby]

The persistence of urban market legends about naked shorting penny stocks continues in absence of very much proof whatsoever. Market makers I know point out that the type of scheme you describe carries so much risk that it would be rare for market maker to engage in such activity.

Speculators in the market seem to love this conspiracy theory.FNRA has increasingly over the last years monitored this issue due to constant speculator complaints.I am not saying it never happens that somemarket maker doesnt take the risk, but few who do stay in business.

[asdfu099]

I agree that market makers can naked short stock. But the 3 day issue is the easiest to get around. They simple transfer the position back and forth from one MM to another. As little as 2 MM's are required. Often there is 3 or 4. This is why there has been names for groups of market makers that gang up on penny stock. The rat pack is pretty notorious.

Once people start to notice what they are doing they will run the orders through other market makers. So people see trade, or UBSS or AUTO up there instead.

You can google market maker fined for naked shorting or other search strings. Many fines have been dolled out. SOme small firms even went under.

[asdfu099]

I do not think anyone can answer this. It resembles a "big boys club" or "insiders" of DTCC or other clearing agents that purposely fail to report there naked short trades or looks the other way while someone else does.

YOu will tend to know there is a large naked short position when you see people spending enormous amounts of time trying to discredit the company. Trying to find false stories innuendoes etc. all pointing to "think twice about buying or holding this stock".

Here is a great site to do some reading on how bad the abuse is: http://www.deepcapture.com/the-story-of-deep-capture-by-mark-mitchell/

Here is a video where a well known Short Seller (some association to the Streetsweeper) admits how he and others do this short and distort: http://www.wimp.com/manipulatingmarket/

Watch the body language of the interviewer when Jim says "it's legal"! Note how Jim says "feed some bozo reporter some false news for them to write on the company. Or call a bunch of traders to start false rummers than buy some 'puts" that are signs that someone thinks the market is going to go down,.

[sanbrunobaby]

Market Makers can place bid/ask for retail or institutional clients, and some even use computer programs to palce their own trades.Both groups can play whatever games they want with the bid and ask, so rather curious why market makers always blamed when any retail investor can do the same thing, except market makers can short the stock temporarily until they settle accounts- and on otc stocks this usually means the same day, or if not within three days. urban legends about shorting penny otc stocks are just that , legends.

if retail investor wishes to tease the bid up, he can do so, then hit the bid when others jump in. investors typically love to buy high and sell low,so for astute trade understanding trading patterns and market maker reactions can be profitable.

market makers can trade on their own account but generally try to not hold inventory of stocks overnight for their own account-just not the business they are in.

[MosEisly]

How does this exactly work? There's an actual person behind each MM on level 2, for every stock???
There are so many different opinions on market makers. Does anyone here know for fact? My own logical conclusion was that for the most part, the market makers are us retail. The sharks manipulate the game and others like to use "market maker games" to explain the bs going on.

[sanbrunobaby]

Just to be objective, does anyone know of a single objective instance supported by facts of a significant short in any sub penny stock ? any retail broker that permits these sort of trades ? for that matter any institutional trader firm that (a) permits short selling of sub penny stocks past 3 days ?(b) past 6 days ?

[sanbrunobaby]

Just an urban legend that speculators love to blame. I know a for some time a market maker personally and he says amongst market makers it is the biggest joke all these urban legends about short selling. Just think about it, if short selling going on in sub penny pink sheet stocks how come except in extremely rare instances it is never factually reported ?

[asdfu099]

The vast majority of the shorting in penny land is done at market maker level. The margin required are not even remotely close to the same. They also have the ability to park short positions and transfer them around to keep them hidden.

This is why prudent investigating links known stock message board forum bashers to these market makers or the funds they represent.

[Goldigger101]

Why do you think so many people, either in error or fabrication, post that shorting is common in sub-penny stocks. Offshore companies follow suit to US companies rules so it doesn't happen there either. Margin requirements would be horrendous even if they could short the sub-penny yet they go on and on infinitum about short squeezes coming in their sub-pennies.

[asdfu099]

AGreed. But we are talking about SHort and Distort on this forum. Many Pump an dump forums exist to discuss that. I wish the short seller truly had to report the naked position. I wish the basher, distortion artists, propaganda spreading people would disclose in the 1,000's of posts they make that they have a financial interest in the stock. ie. have a short position or are paid to clutter message boards with negative views. But the good thing is when the real companies emerge very successful the S&D shysters usually get destroyed by the losses. It makes them think twice about doing it again/